Category Archives: SPOT on Costs

Thinking About 2025: Driving Innovation in Insurance Claims Technology

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The U.S. insurance industry continues to exhibit its remarkable resilience, as underscored by its impressive financial turnaround in recent years. However, sustaining this momentum and preparing for future challenges demand more than just traditional strategies. As highlighted by the exceptional leaders featured in Insurance Business America’s Hot 100 2025, the road ahead involves fostering technological innovation in claims processing and ensuring the right expertise is on board to drive these initiatives.

The Call for Claims Technology Innovation

The modern insurance landscape necessitates a profound shift in how claims are managed. From the First Notice of Loss (FNOL) process to complex litigation management, the integration of advanced claims technology has proven to enhance efficiency, reduce costs, and improve customer satisfaction.

For example, AI-driven tools like predictive analytics and natural language processing are now being used to:

  • Identify high-risk claims early: This enables insurers to allocate resources effectively, mitigating costs and risks associated with prolonged claims.
  • Enhance fraud detection: Machine learning models can analyze patterns in data to detect anomalies that may indicate fraudulent activity.
  • Automate routine processes: By automating document reviews and data entry, insurers can free up human resources for more strategic tasks.

These advancements align with the pressing need for seamless systems integration. As noted in the industry, the “tech tango”—the harmony of old and new systems—enables companies to maximize the benefits of their investments without disrupting ongoing operations.

Hiring the Right Consultants for Success

Innovation in claims technology is a complex journey that involves navigating challenges such as system integration, stakeholder buy-in, and operational disruptions. This is where the role of specialized consultants becomes invaluable. It is critically important to recognize the gaps and seek complementary expertise to bridge them effectively.

Hiring the right consultants can ensure:

  • Objective assessments: Independent experts provide unbiased evaluations of existing systems and processes.
  • Tailored strategies: Consultants bring a wealth of experience across different industries, enabling the customization of solutions that align with an organization’s unique needs.
  • Streamlined implementation: With dedicated project management expertise, consultants help mitigate scope creep and ensure timely execution of technological initiatives.

Furthermore, consultants facilitate cultural change within organizations by aligning technology goals with broader business strategies. They act as catalysts for innovation, ensuring that both technological tools and the people using them are set up for success.

Balancing Technology with Human Expertise

The future of claims innovation lies in striking the perfect balance between automation and human oversight. As seen with solutions like  AI-driven FNOL process, technology can handle simple claims efficiently, but complex cases still require human judgment and empathy.

Investing in robust training programs ensures that staff can harness the full potential of new technologies. It’s equally critical to maintain transparency in AI-driven decisions, fostering trust among both employees and customers.

Charting the Path Forward

As the U.S. insurance market is poised to reach $4.50 trillion by 2029, the stakes for staying competitive are higher than ever. Embracing claims technology innovation and enlisting the right experts to guide this transformation are no longer optional—they are essential strategies for thriving in a rapidly evolving industry.

The journey to modernization requires bold leadership, strategic investments, and a commitment to enhancing both technological capabilities and human expertise. By addressing these areas, insurers can transform claims management from a cost center into a driver of customer satisfaction and operational excellence.

What steps is your organization taking to innovate in claims technology? Share your insights and experiences in the comments below!

5 Early Case Assessment Strategies That Will Lower Your Litigation and Outcome Costs

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Is your claims department losing money on unnecessary litigation? If you’re not employing robust Early Resolution Strategies (ERA), the answer is probably a resounding “yes.” But don’t worry, savvy claims leader – we’re about to turn that ship around.

In my years of working with insurance companies, I’ve seen far too many claims spiral into costly legal battles that could have been avoided with proper ERA. Today, we’re diving into five game-changing strategies that will help you minimize litigation costs and keep your CEO smiling when they review those quarterly reports.

Why Early Case Assessment Matters

Before we jump into the strategies, let’s remind ourselves why ERA is so crucial. Early case assessment is your claims department’s crystal ball – it helps you predict the likely outcome of a case, estimate potential costs, and decide on the best course of action early in the process. Go review some recently settled claims and ask could the decision to settle have been made sooner? Would that have changed the approach to litigation spend? Faster resolutions, lower costs, and happier policyholders is certainly a desirable outcome. Now, let’s get to those strategies!

5 “Must-Implement” ERA Strategies

  1. Embrace Data Analytics – If you’re not using data analytics in your ERA process, you’re flying blind. Modern claims systems are treasure troves of historical data. Use this data to identify patterns, predict outcomes, and make informed decisions.
  2. Implement a Standardized ERA Checklist – Don’t leave ERA to chance or individual discretion. Develop a comprehensive checklist that covers all aspects of early case assessment. This should include liability analysis, damage evaluation, potential defenses, settlement value estimation, and litigation cost projection. A standardized approach ensures consistency and helps less experienced adjusters spot potential issues early.
  3. Leverage Technology for Document Review – Gone are the days of manually sifting through mountains of documents. Invest in technology that can quickly analyze large volumes of data. AI-powered document review tools can identify key information, flag potential issues, and even suggest similar past cases – all in a fraction of the time it would take a human.
  4. Collaborate with Legal Early and Often – Your legal team shouldn’t be an afterthought in the claims process. Involve them early in complex or high-value claims. Their expertise can help identify potential legal issues, assess the strength of the case, and develop effective strategies. Keep everyone on track and the outcomes will improve.
  5. Train Your Team in ERA Best Practices – The best ERA tools in the world won’t help if your team doesn’t know how to use them effectively. Invest in regular training sessions on ERA best practices. This should cover not just the technical aspects of assessment, but also soft skills like negotiation and communication. A well-trained team can turn your ERA process into a powerful cost-saving machine.

Putting It All Together

Implementing these strategies isn’t a one-and-done deal. It requires ongoing commitment, regular evaluation, and a willingness to adapt as you learn what works best for your organization. But trust me, the payoff is worth it. I’ve seen companies reduce their litigation costs by up to 30% through effective ERA strategies.

Remember, every dollar saved in unnecessary litigation is a dollar that goes straight to your bottom line. And in today’s competitive insurance landscape, that’s an advantage you can’t afford to ignore.

The ERA Challenge

Here’s a challenge for you: take a look at your last 10 litigated claims. How many of them could have been resolved earlier with a more robust ERA process? If the answer makes you uncomfortable, it’s time to take action.

What ERA strategies have worked well in your claims department? Or what challenges are you facing in implementing ERA? Share your experiences in the comments below – let’s learn from each other!

Staffing a Claims Department

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So what’s a good staffing ratio?

Figuring out the appropriate levels to staff a claims office can be a tricky exercise. Having too many claims professionals can have a negative impact on bottom-line financials, however, having too few can also have a more costly impact improper reserves, higher settlement payments, increased loss adjustment expenses. Determining the correct balance of files to handlers is critical to ensure the claims department can serve the company, claimants and customers appropriately. Well run claims department manage their staffing by developing empirical methods to model the correct need. Those models are also reviewed as part of regular management metrics and adjusted to suit changing conditions.  While it may seem cost effective to run a very lean claims department, the truth is if it is too lean costs will go up, claims handling will suffer and the company can be exposed to liability.

How do you determine what the appropriate staffing level is?  Unfortunately there is no hard and fast rule that defines exactly how many files per handler is appropriate. The nature of the type of claims handled, the company approach to customer service, internal and external variables are going to impact how many claims professionals are needed. For example, the number of claims professionals needed to handle a small fender bender property claim is dramatically different than needed to handle a large commercial property loss.  This can also be said for a standard bodily injury claims versus a complex medical malpractice matter. There are so many factors that go into each type of claim that must be considered prior to developing a working staffing model.

What type of claims department are you?

What type of claims department are you? Do the types of claims you handle require a touchy feely claims department that relies heavily on interactions with clients? Some carriers pride themselves on significant and meaningful customer contact because that customer focus differentiates them in the market place even over the price of coverage.  Other types of insurance companies don’t rely on the customer interaction as the differentiator and as such a customer centric claims department may not be the focus. Think Motel 6 versus The Four Seasons. Both provide a place to sleep but clearly the approach is completely different.

For example, a homeowner’s claim will require multiple hands on connections with the claimants to build a level of client satisfaction and help to maintain more renewals. Conversely, in D&O insurance, the contact is rarely as interactive and the client is usually more concerned about the financial ability to pay claims and a less expensive premium. Regardless, given the value the claims, the expertise needed to manage a D&O loss versus a property claim and the frequency of losses coming into the office will all impact the number files that can be assigned to any one professional.

Developing a staffing metric must be based initially on the type of claims organization you are and how much contact with the client is expected. From there a metric can be developed to deal with other factors impacting the time needed to handle a file. Such a metric may, for example, be based upon not just the number of files in the door but on how many touchpoints need to be made on how many claims and over what period of time. Often determining the impact of those touchpoints will require conducting a time study to learn how long each touchpoint takes to complete.

What are the internal variables?

Internal variables to consider involve those issues that can be controlled within the company and, like the type of claims department you are, will impact how resources are implemented. Some internal variables to consider:

  • Skill levels of claims professionals needed – Does your claims department manage files with entry level workers or do you require experienced claims professionals with advanced degrees?
  • Support staff and ancillary claims professionals – are claims professionals expected to do everything from sending letters to coding to on-site investigations to state reporting? Or are some of those tasks handled by others?
  • Technology – are you up to date with the latest and greatest automated claims technology or are there limitations to the systems in place? Does your technology help to automate workflow?

What are the external variables?

External variables can equally impact staffing levels and must also be considered. These variables can’t be controlled but they can be measured.  The trick is to create metrics to identify trends in external variables that could have an impact on staffing.  Frequency of claims activity is an external variable that can be predicted based upon the number of policies and other events that impact claims being filed. For instance, bad weather during the winter months will likely increase auto property claims being filed compared to in summer months.  Being aware of the natural cycles and predicting trends is an important factor in creating models.  External variables to consider include:

  • Jurisdiction and court delays
  • Claim frequency
  • Claim cycles
  • Regulations and reporting
  • Legal changes

Creating a staffing model

Creating a staffing model must take into account a number of factors and there is no one size fits all approach. Understanding the time it takes to handle an issue will be needed to determine an appropriate staffing level. At the very least there must be an understanding of new claims set ups and expectations as well as what is expected to manage a book of claims.

As an example in the simplest form, a claims department may expect a claim professional to only handle one new claims set up a day. If a department gets 20 claims a week then they would need 4 claims professionals (20 claims/5 days = 4 per day).  This is a basic example because there are clearly more factors to consider for claim professionals to accomplish in a given day.  The model needs to be built by understanding the times it takes to manage particular tasks. If in addition to setting up one file it is expected that a claims professional review 3 files on diary and which includes contacting the claimants and insureds to provide updates, then a picture of how much time needs to be spent to perform various tasks can be factored into the model.

Conclusion:

Determining the optimal staffing ratio for a claims department is a complex and nuanced process that requires careful consideration of numerous factors. There’s no one-size-fits-all approach, as each insurance company’s needs and priorities differ. The key takeaways from this discussion include:

  1. Balance is crucial: Overstaffing can negatively impact financials, while understaffing can lead to higher costs and potential liability issues.
  2. Consider your company’s approach: The type of claims department you run (customer-centric vs. efficiency-focused) significantly influences staffing needs.
  3. Analyze internal and external variables: Factors such as staff skill levels, technology, claim frequency, and legal changes all play a role in determining appropriate staffing levels.
  4. Develop a data-driven model: Create a staffing model based on empirical data, including time studies and performance metrics.
  5. Regularly review and adjust: As the insurance landscape evolves, continually assess and update your staffing model to ensure it remains effective.

By taking a thoughtful, analytical approach to staffing, claims departments can strike the right balance between efficiency and quality service. This not only benefits the company’s bottom line but also ensures that claimants and policyholders receive the level of care and attention they deserve. Remember, an well-staffed claims department is a cornerstone of a successful insurance operation, contributing to customer satisfaction, risk management, and overall company performance.

Why Don’t Claims Organizations Track Claims Through The Process The Way UPS Tracks A Package?

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Shipping Logistics Made Easy

One of the most amazing things to me about the holidays these days is online order tracking for the various shipping companies. What a truly amazing piece of technology.  Recently I bought a present for my son who was accepted into college early decision. I ordered a school sweatshirt and was able to follow it at every step as seen here:

I think we are all used to this kind of precision in the shipping industry.It certainly is in the interests of UPS to know exactly where packages are in the process. Being able to route resources and manage the logistics of a large shipping company require this level of detail. The fact is UPS now advertises that they are in the “logistics” business. At some point someone in the company came up with the idea that the consumer would also benefit from having the same information. The consumer can participate in the process and even re-route the package to a new address while their package is moving through the system.  UPS understood the value to customers in managing their own shipping logistics and changed the way both shippers and receivers look at moving packages around.

Claims Logistics Can Be Easy Too

How many in the claims industry have this kind of detail about their claims in process? And if the claims customer could also track information and participate, how much money could be saved?  If UPS can tell me that a 3 lbs. package has just been moved from one truck to another, why can’t claims departments use similar information about claims to understand and streamline their businesses?

How valuable would it be to truly understand from different aspects of a claim where it is in the process?  Could resources be realigned to deal with small blips in claim volume or severity increases? Would the information help underwriters understand an emerging trend that may cause a need to shift pricing? How efficient could a claims organization be if it could see increases in vendor spends in one part of the country versus another?

How about if an insured could have certain access to the claim in process? Would they be able to assist in their defense more comprehensively? Could they help change the direction of the claim being able to see the path that is being undertaken?

Claims Tracking

Thinking of the claim as a package in transit may be one way to explore new ways to manage files. A claim package comes into the office. It is logged into the system and assigned certain attributes. It is then sent to a staging area where its attributes (shipping information) are analyzed and then it is placed onto the correct truck (claim department/handler) for delivery. Along the way it may have to be redirected for more analysis (various shipping locations) where additional decisions about resources such as experts or further investigation can be made (transfer stations or warehouses).  From there it’s final course can be set and a settlement can be reached (delivery).

I can see taking all the information that is gathered along the way and have it used to understand, not just the single claim, but the entire book of claims. With this information a claims department could shift resources to be more efficient.  Analysis could be done at each step to help improve efficiency and lower costs. Looking at claims through the eyes of other successful industries is a good way to attack old problems.

How do you think claims could benefit if they could be tracked like a UPS package?

2 Approaches To Early Resolution And Cost Savings For Litigation Guidelines

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Let’s State The Obvious: Early Mediation Can Lead to Lower Costs of Defense

Most insurance and claims adjusting companies have Defense Counsel Guidelines.  I’ve seen many of them.  It’s hard to remember, though, seeing one in which a contingency plan for early settlement was addressed.

Most guidelines I’ve seen are focused on having a case evaluated for settlement at 6 months.  By that time, your defense counsel will have interviewed the client, propounded initial discovery, received and reviewed the medical records and taken the plaintiff(s)’ deposition(s).

Perhaps you could reduce your ALAE significantly by including early mediation in your guidelines. (Transparency caveat:  I’m a mediator and I have a bias.  I mediate cases nationwide.)

2 Ways To Include Mediation In Attorney Guidelines

Here are two suggestions.  One is fast-tracking that process to 3 months.  The second is requiring your lawyer to approach plaintiff’s counsel about mediation within the first 6 months.

  • Fast tracking settlement.  In three months, it’s unlikely you’ll be able to get all of the medical records and receive responses to discovery and take the plaintiff’s deposition.  Ask yourself, though, if you really need all of that information to settle the case.  In some cases, particularly cases of clear liability, the answer is:  probably not.  Yes, you may settle some cases for a little more than having all of the usual discovery would suggest.  On the other hand, plaintiff’s counsel may be willing to take less money in return for not having to work the case up.  You will also be saving attorneys’ fees and litigation costs and closing files.
  • Mediation date within 6 months. There seems to be an institutional bias against the defense being the first side to suggest a mediation.  The underlying fear is that plaintiff or her counsel will conclude your case is weak and their settlement aspirations will zoom skyward and their bargaining posture will harden.  Do you have any data to support that bias?  I haven’t seen any.  Try it out, then calculate your overall savings.

I applaud all sides when they come to me to mediate a case either pre-suit or very early on in the litigation.  I try to set the expectation that the exploration of settlement at an early stage is an opportunity for both sides to be realistic, not only about the value of the case, but also about saving litigation costs.

Getting Creative And Reducing Claim Costs Without Sacrificing Quality – Part II

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Building blocks on which to create a new foundation to improve processes

Last month, I discussed the building blocks needed to reduce claim and litigation costs, while still maintaining a strong focus on quality. Those building blocks included:

  • collecting current data about your claims and litigation
  • evaluating the claim and litigation work itself
  • settling on a carrier claim and litigation handling philosophy

These building blocks create a foundation on which to build new processes and procedures that will reduce your claim and litigation costs, and maybe even decrease you volume as well. I refer this building process as looking at What I Have, What I Want, and What I See.

What I Have – All This Data

The data you collected regarding the current state of your claims and litigation is an excellent starting point. Examine your data and identify the areas that you wish to improve.

For a couple of reasons, while the amount of your legal spend may a visible target for improvement, don’t spend too much time on rate-issues first.  This is because the impact of improved processes and procedures will likely decrease total spend naturally, without having to address rate issues. Focus instead on issues like overall litigated volume (the number of pending litigated claims), cycle time (the average amount of time litigated claims take to close from inception), severity (of your pending litigated claims), and other factors. Developing processes and procedures that improve these other factors is a good starting point.

What I Want – Creating The Benchmark

Look again at your non-dollar data. Think about what you believe those numbers should reflect. For instance, if the average time it takes a litigated claim to go from inception to closure is two years (730 days), you know that, on average, you will be paying panel counsel for two years to bring that matter to a close. Based on your knowledge and you your industry contacts, determine whether this number appears high. Do this for other non-dollar metrics that you have measured.

Look at each area you wish to improve and consider a practical benchmark and goal you would like to achieve. My advice is to not set arbitrary goals, as they bear no particular relation to what you will be able to achieve, and thus set your organization up for disappointment or worse. Instead, work with stakeholders in the process and think about how your metrics work together to form a complete picture.

Set incremental measurement points. Hypothetically, you may be starting with a two year cycle time and wish to set a benchmark objective of reducing that by six months, followed by a long-term goal of reducing it to one year. Again, always make sure that your objectives align with the other information you are obtaining. Do your objectives make sense in light of the jurisdiction, the severity of the portfolio, the type of case, and the claims handling philosophy of your organization?

You may have a very diverse book of cases and wish to develop benchmarks and goals first by line of business, or by stakeholder. In fact, when you start objectively considering all of the factors involved, you may end up with benchmarks and goals that look something like this:

  • Overall Litigated Claim Pend Time – Current Average: 730 days
  • Motor Vehicle Accident (simple): 550 days (benchmark); 365 days  (goal)
  • Product Liability 700 days (benchmark); 650 days (goal)
  • XYZ Claim Professional 680 days (benchmark) ; 600 days (goal)

These numbers are purely arbitrary for the sake of example, but they are illustrative of processes you may wish to consider when examining your current situation and deciding how you’d like them to look in the future.

What I See – You Have To Look At What Is There

A continual focus on quality is critical. Higher-quality claim and litigated file management results not only in lower indemnity payments, but in decreased costs as well. As someone who has managed thousands of files with bad faith allegations, there is nothing more expensive than trying to successfully litigate a poor quality claim file.

One of the core building blocks of the process are evaluations – evaluations of all professionals involved in your litigation life-cycle, from claims professionals to attorneys. In looking at those evaluations (whether through internal or external audit), identify those practices that need to stop and those that are more likely to extend the cycle-time of your cases.

A simple example — in reviewing a number of litigated claims last year, I noticed a consistent pattern of defense counsel granting numerous extensions to opposing counsel to respond to written discovery. These numerous extensions were causing files to last for months with no activity (other than counsel billing for those activities associated with granting the extension). During my review, I made note of such patterns and then developed ways of addressing them through new procedures and processes. In addition, I also considered what I discovered in these evaluations and my solutions for addressing these issues in my benchmarking and goal-setting.

In the next and final part of this series, I will explore the nuts and bolts of the procedures, processes and guidelines that can be used when moving forward with a revamp of your litigation management system.

Time to Get Creative – Reducing Claim Costs without Sacrificing Quality (or your sanity)

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Bright ideas will help reduce legal costs while still getting great service

Even as the country continues its difficult economic recovery, Moody’s recently concluded that P&C personal lines insurers remain financially sound. While such a report is good news, Moody’s also noted that challenges such as rising claim severity trends and significant property catastrophe risk remain. All this leads to an increased pressure to reduce costs and close claims.

The reality that claim and litigation departments are cost centers as opposed to income generators increases these pressures. Claim and litigation departments are also asked to do more with less resources and are under increasing pressure to close claims and litigated files faster than ever, while still maintaining claim handling and litigation management best practices. With all these challenges, how do claims professionals succeed? They get creative.

What You Know and More Importantly, What You Don’t Know

Before you can make changes and employ new processes, you have to know what you know and what you don’t know.  Obtain as much information as you can regarding the following:

  • Number of current litigated and non-litigated claims, broken down by type and severity
  • Average length of pending litigated and non-litigated claims
  • Average cost per closed litigated and non-litigated claim file
  • Average number of days necessary to close litigated and non-litigated claims
  • Average amount paid (indemnity) per closed litigated and non-litigated claim

These are just the basics.  If you have more information available, get it.If you don’t have this information, you have gained some valuable knowledge as well, namely, that you will need to develop or implement ways of tracking such information as part of your plan.

Who Is Doing the Work?

Next, you have to evaluate the strengths and weaknesses of your claim handlers, claim managers, outside counsel, and any other vendors you employ to handle claims and litigation.  If you haven’t formally evaluated these folks in a while, now would be a good time to do so.

Find out what they do, how they do it, and ask them for feedback regarding how they think that they can do their jobs better.  One of the biggest problems I’ve seen are companies that get in the way of their employees being successful often through employing processes and procedures that look good on paper, but don’t make sense in practice.  The only way to know if this is occurring in your organization is to spend some quality time with the people who are doing the work.

And don’t leave out the lawyers!  Although some may believe that panel counsel are only interested in billing you as much as they can, the good ones are also in an excellent position to know if your litigation procedures are costing the carrier money.  They can also provide procedural and process changes that may result in moving litigation to conclusion more quickly.

Know Thy Carrier

While all carriers want to decrease costs, decrease claims, and decrease litigation,  there are different philosophies as to how to accomplish these goals.  Some carriers may want to avoid litigation at all costs because they don’t want to pay legal fees and thus, they may be willing to pay more on questionable claims in order to avoid litigation.  Some carriers may want to take a hard-line approach with all claims and litigation (i.e. if they can’t prove it, we’re not paying it).  Some carriers take a more practical, business approach and want to do a cost-benefit analysis regarding the payment of claims and litigation.

You must know your carrier’s philosophy before you can make changes that count.  Moreover, the philosophy you choose is the one that is going to be the face of your claim and litigation department for the world to see, so make sure it’s the face you want to display consistently.  Companies that do not have, or do not know, what their claim and litigation philosophy is will not be successful at consistently reducing costs and closing claims and litigation.

In order to develop your philosophy, you will need to work with the balance of senior management and other relevant stakeholders to discuss the options and arrive at a conclusion that everyone is comfortable with promoting throughout the organization. Depending upon the size of your carrier, the number of people involved, and the difficulty you have obtaining information, going through steps one through three may take approximately two to six months.  However, once you complete these steps, you will be armed with everything you need to sit down and draft your new claim and litigation management plan.

Check back in December for part two of my blog that will discuss initial steps in your new claim and litigation management plan and provide an example of a plan that was successful for me.

6 Steps To Reduce Expenses For Medical Experts As Suggested By The Expert

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If you send it all, they will bill for reviewing it all

Lowering expert costs are simple if you just send only the information needed

I have been a medical expert for both the plaintiff and the defense for more than 40 years in various states.  I am amazed at the volume of unnecessary medical records and other material sent to experts for review.  Once I receive them I have to spend numerous hours, at considerable expense to lawyers and insurance carriers, wading through pages of irrelevant information and quite often duplicates of material.

How can this be avoided?  How can this unnecessary expense be reduced?  How can this process be streamlined and made more efficient?  The following are some suggestions:

  1. The lawyer or insurance carrier is aware of the plaintiff’s complaints and should restrict material initially sent to the expert to the time frame of the alleged malpractice event.  This may consist of anything from one page, when an incorrect dose or procedure was the cause of the malpractice suit, or a longer time frame if that is warranted, or to the particular admission in which the malpractice event took place.
  2. The lawyer should send the pertinent pages of the medical record on the event with necessary back-up material, e.g., pertinent laboratory, radiological or pathological reports, or pertinent focused nursing notes or flow sheets.
  3. All other material, e.g., medical records of previous unrelated admissions and duplicative or irrelevant information should be culled from the record and not sent to the expert. The appropriate culling of the record can be done by trained para-legal personnel at considerable less expense compared to this being done by the medical expert.  This will expedite the process and be more cost-effective.
  4. The medical expert should then request focused information to conclude his evaluation and report.
  5. If the case is to be settled (and I believe that 90% of them are) then this is all that should be required.
  6. Should the case go to trial, and should it be necessary, additional records can be sent to the medical expert for review in preparation for trial.

Editors Comment:

The costs to defend malpractice has been rising for years (see my post – Medical Malpractice Report Shows Increased Severity Despite Lower Frequency) and this is really a practical idea to help lower those costs. Once an expert receives the entire file they will be obligated to review the material. This suggestion need not be limited to just medical experts and can be used in a variety of cases where experts are retained. Experts are an expensive, necessary, part of the process, and looking for new ways to lower those costs are a good thing.

Any other suggestions for lowering expert costs?

Cutting Costs Without Overloading The Claims Handler – Part 2 Of The Series

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Trying To Save Money But Can’t Figure Out Which Road To Take?

Last week I offered the first of two solutions to reduce costs in key claims cost cutting areas when hiring full time staff is not an option. As I noted in the post, 2 Cost-Cutting Solutions To Get Work Done Without Overloading Claims Handlers, overworking claims handlers with additional tasks not part of their core job function – to evaluate and settle claims – can result in some aspect of their job suffering. Key cost cutting initiatives, such as Anti-Fraud and subrogation recovery, get put aside by the handler and never get the fullest attention needed to be successful.

Having achieved improved results in my prior life, I suggested both outsourcing and hiring a dedicated part-time employee to handle certain tasks. The first example I presented centered on having an outsourced vendor put a resource “on-site” for improved results. In the context of an Anti-Fraud solution, having the vendor “on-site” resulted in more fraud reports to the states, improved claim handling through knowledge transfer, and lower costs. The program was a success.

This example tackles a similar problem of trying to improve results without the need to hire a full time employee in the area of litigation management bill review.

Claim Handlers Really Don’t Do A Good Job Of Cutting Legal Bills – A Part Time Hire Solves The Problem

Conventional wisdom has been that claim handlers are in the best position to review legal bills on the claim files they work on. The reality is legal bill review, for most claim handlers, is a dreaded task considered a necessary evil.  In addition, I find that some claim handlers rarely cut inappropriate charges because they develop a working relationship with the attorney and do not want to hamper that relationship for what are felt to be minor issues.  However, when the bill review process is separated from the claims handler, many of these concerns or conflicts go away. Handlers can focus on managing claims and developing open working relationships with counsel and billing issues can be addressed by others.

Possible Solutions

In looking for a proper solution I considered vendors that review legal bills as well as bill review software.  Legal billing vendors that provide the service usually get paid based upon the amount of money they save. This type of review can create problems and can sometimes be perceived as a conflict.  I was not trying to create an adversarial relationship with counsel, so this idea was put aside. Bill review software provides an excellent job of catching billing discrepancies that frankly can’t be caught manually. Unfortunately, billing software requires a larger capital investment, IT involvement, and time to implement. While the projects often pay for themselves through reduced legal fees, at the time, it was not a road that I was able to follow. What I needed was an attorney who understood the legal process and could work with, and speak with, counsel on billing issues. As I was working in a claims organization that hired many lawyer/claim handlers it seemed like a natural solution.

How To Make It Work

While I did not want to hire a full time attorney, I was approached by someone who knew a stay-at-home attorney looking to work 20 hours a week in a flexible environment. Being able to provide that kind of work load is sometimes not possible for many companies, however, given what I was looking for, the solution to my problem seemed to have found me. At the time, the company I worked for had an excellent claims system (since I helped design it I was always going to say this) which made it easy to set up a part time employee remotely. A new process was designed to allow claim handlers to send our litigation bill reviewer invoices for compliance analysis and review.  At first it was decided to limit reviews to invoices with known issues and ones over a certain dollar amount. Bills could be forwarded electronically, reviewed, analyzed and returned to the handler with suggested changes. A form letter was instituted where disputed charges were listed and explained. The new program was in place and it worked.

In the first year the program reviewed over $15 million of legal invoices. On average, legals bills were reduced by 10% with most of the reductions due to billing errors, duplications and failing to comply with agreed upon rates. The most fascinating findings came when we opened the services to Third Party Administrators doing work on the company’s behalf. It turns out that bill review reductions were 2-3% higher for work being done for the TPA than for work being done for in-house claim handlers. No matter what the reason, the bottom line was over $1.4 million dollars saved in the first year alone.

Lessons Learned

  • Claim handlers, despite being close to the claims process, were not in the best position to review legal bills
  • Attorney’s seem to be a little more cautious reviewing their billing submitted to the company directly than when submitted to the TPA
  • A small amount of diligence can result in huge savings – these savings add up and were clearly worth the small investment to retain a part-time employee

The solutions I offer here, and the prior post, are not limited to world of SIU and litigation bill review. Hiring a part-time employee, or “on-site” vendor,  to manage any initiative is a great idea when specialized knowledge is an appropriate way to get better results and the need for a full time employee is not needed. As noted, subrogation and salvage recovery are great areas that can also benefit from these types of programs.

I have just offered up two solutions to the age-old problem of trying to do less with more. While the solutions are not new, sometimes to become more effective you need proper execution and new ways to look at old problems.

2 Cost-Cutting Solutions To Get Work Done Without Overloading Claims Handlers

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Too Many Tasks, And Hiring New Staff Is Not An Option? (Part One of Two)

Not every company can afford to hire dedicated teams to focus on cost-saving initiatives such as subrogation or Anti-Fraud. Sometimes there is simply not enough work to justify a full-time position internally. Regardless, failing to focus on cost-saving programs can increase loss and expense payments.

So how do most companies handle the situation? By adding those tasks to a claims handler’s already overloaded job function. The problem is, the more tasks they are asked to do, the less they can focus on being a good claims handler.  The usual result of overloading the claims handler is that they not only can’t focus on the core aspects of their job – to evaluate and settle claims – but they also can’t properly attend to the additional work. Both jobs end up suffering.

Tasks such as subrogation and legal bill review are the last things claims handlers want to do. Furthermore, these tasks are better performed by dedicated staff. Take a look at any department with dedicated subrogation specialists and you will see higher rates of recovery than those without. This is also true in the areas of Anti-Fraud and litigation review. So how can a claim department maximize results and lower costs, while also ensuring claim handlers can continue to focus on their core job functions? From my own experience, two recommended practical solutions to consider are outsourcing with on-site vendors, and hiring part-time employees.

Taking a page from my past, this post presents the first of two solutions that I implemented to secure successful results.

Outsourcing As A Solution – An Anti-Fraud SIU Example

Outsourcing certain aspects of the claims department can make good economic sense.  However, not every company needs a 30-person call center, nor do they need to invest the resources to build one. In those instances, partnering with a vendor can be an ideal way to provide the best of the best. One of the potential problems, however, is if your company has only a limited need, the vendor may not always give you the most attention. Additionally, completely outsourcing the task means that claims handlers lose the benefits of the expertise that the vendor provides, and often may not even be aware of the available services offered. I was faced with this very issue when dealing with managing an Anti-Fraud unit. My solution was to require the vendor to have their employee “on-site” in our office.

What Did Not Work

Looking for fraud is a key part of a claims handler’s job, and many states require fraud reporting to state investigators. The company I was working for had a substantial commercial casualty book, as well as other specialty lines of coverage. There was not quite enough work to justify a dedicated Special Investigation Unit, but still the work needed to be done. I decided to outsource the process to a Third Party Administrator who had an active SIU unit. The vendor was contracted to handle all the company’s SIU state reporting requirements as well provide any investigation services that our internal claim handlers needed. In addition they were to provide required Anti-Fraud training to our team, and perform audits of our claim handling TPA’s for compliance with Anti-Fraud reporting requirements.

The vendor provided Anti-Fraud training to the team at the onset of the relationship, and then visited the office from time to time to provide updated training and answer questions. After a year of working with this vendor, we discovered that fraud referrals to the state were no different than before the vendor was hired. In discussing the issue with the claims handlers I learned that, despite initial training, the interaction with the vendor was typically reactive, and there was minimal regular contact with investigators. As a result handlers were not aware of the vendor’s range of services, nor did they even know how to properly identify Anti-Fraud red flags. The process and the program weren’t working and I had to make a change.

How To Make It Work

I began to look for a new vendor who would provide a solution that would produce better results.  I determined that the only way I was going to get more fraud referrals was to have someone sitting in the office on the front lines with the claims handler. For the new contract, I found a vendor that would assign a dedicated SIU investigator to sit in our office several days a week. With the investigator on-site, I was able to produce a more proactive approach to looking for potential fraud. Because they were on-site, the vendor was able to use our claims system to review files and actively monitor claims for potential fraud. This was not possible with our previous vendor in an an off-site reactive model.

Once the new program started the difference was almost instantaneous. Claim handlers sought out advice about claims with possible fraud. Investigations increased and claim handlers became more proficient at identifying industry red flags. SIU state referrals increased over 200%, and due to new investigations, several files were able to have indemnity reductions. Handlers learned that sometimes something may not be an outright fraud but instead were exaggerated claims. With the assistance of the “on-site” investigator, handlers learned new ways to analyze damages and reduce loss costs. The program was a success.

Lessons Learned

Changing the way a vendor works with your company can have dramatic results. In this particular initiative I was able to learn:

  • If it’s broken, then fix it. Don’t worry about changing your approach; it’s sometimes the best thing. Too often, leaving a merely adequate solution in place is worse than starting over to make improvements.
  • Be persistent in thinking outside the box in an effort to find new ways to approach basic solutions.
  • Having your vendors work on-site with your team can have many advantages, including the “absorption” effect. Your vendors’ expertise, knowledge, and skills are transferred to your internal staff.

In Part 2, I will give an example of using a part-time attorney to review legal bills as a way to lower your legal expense dollars.